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Fixed Term Contracts – Working beyond the expiry date

In many industries, Employers can make use of fixed-term contracts especially when they acquire a project with a limited duration.  Staff members are appointed accordingly to service that specific project.  These projects usually last only for a finite period at which time the employment contract must also come to an end.  In order to make this both a viable and sustainable situation, the employer usually appoint the employees on a fixed-term contract. 


The Labour Relations Act defines a fixed term contract as an employment contract that terminates on one of the following three occurrences:

a.      The occurrence of a specified event;

b.      The completion of a specified task or project; or

c.      A fixed date, other than an employee’s normal or agreed retirement age.


The above seems relatively straight forward.  Part ‘a’ and ‘b’ is easy to follow.  The employee is employed for a specific task.  Once this task is completed, or a specific event occurs, the contract terminates.  The terms are straight forward and easy to follow.  The same can be said about part ‘c’.   


Unfortunately, it is easy to become lax with the rules.  What happens if the contract’s expiry date arrives, but the employer needs the employee for a little bit longer?  What happens, if the employee works past the expiry date of a fixed term contract?  


The Labour Appeal Court had to make just such decision in the case between the Department of Agriculture, Forestry and Fisheries vs Teto and Others [2020] 10 BLLR 994 (LAC).  In this case, the employees had been engaged on a fixed-term contract for the duration of 12 months but had continued working after the expiry date.  During the period after the expiry date, the employees performed the same tasks until their contracts were terminated at a later stage. 


The Labour Appeal Court held that if an employee is initially employed on a fixed-term contract and continues to work for the employer after the fixed-term contract ends, then the contract is deemed to be tacitly novated (replaced with a new contract) into that of permanent employment contract unless there were facts to the contrary. 


It is therefore extremely important that the Employer adhere to the limitations of their own fixed term contracts.  Should an employee come to the expiration date of their contacts, and the employer require the employee's services for longer, a new agreement must be entered into.  Failure to enter into a new agreement could result in an unfair dismissal and a subsequent financial penalty against the employer.